Diversity and the Performance of Selected Financial Institutions of Asia

Abstract

Linking with the business case for diversity, this study examines whether the top management team (TMT) and the board of directors (BODs) diversity has a positive impact on financial institution (FI) performance in select countries of Asia. We use data of 119 financial institutions across Asia for the year 2015. We use three proxies for diversity, that is, nationality diversity, gender diversity, and age diversity of TMT and BODs. To investigate the impact of TMT and BODs diversity, cross-sectional ordinary least-squares estimation is applied, using Return on Average Assets (ROAA%) as a measure of performance. We find that nationality diversity and age diversity is positively and significantly related to FI performance. Our evidence indicates that executives and board members with diverse exposure and younger age improves FI profitability.

Keywords: Top management teams, board of directors, diversity, performance, financial industry